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Sunday, September 16, 2007

A-Rod ain't worth it

For the past year, Dan Rosenheck has quietly been writing the best column in baseball. On irregular Sundays in the NY Times, Rosenheck, who also writes for the Economist, breaks down baseball hype in the Moneyball tradition, with help from Baseball Prospectus editor Nate Silver, who created the baseball metrics PECOTA and Secret Sauce. Rosenheck has argued that Manny Ramirez is such a bad fielder that the Red Sox would be better off with a random replacement (Rosenheck suggests Moneyball prospect Nick Swisher), that purposely walking Barry Bonds is a bad strategy and that he is a bargain when a free agent (by the way, no one seems to notice that Bonds's OPS is second only to A-Rod's this season), and that the AL is to the NL as the NL is to the Nippon Professional League:
At a team level, an average A.L. squad would probably improve its record by about 10 games if it could face N.L. competition, meaning that last year's Yankees probably would have been a 107-win juggernaut if they had played the Mets' schedule.
According to Forbes magazine, N.L. teams earn just as much revenue on average as A.L. ones do, despite their smaller payrolls, which makes them more profitable: the average N.L. franchise posted [a net] operating income of $19.9 million in 2006, compared with $12.7 million for the A.L.

There are long-term financial benefits to winning a World Series, but so much luck is involved in the playoffs that N.L. owners may not have a clear economic incentive to buy the best team possible. The optimal strategy may be simply paying for a club that is good enough to make the playoffs in the weak N.L., and hoping it gets hot at the right time to snare a title -- just like last year's 83-win St. Louis Cardinals, who would probably have been the fourth-worst team in the A.L. last year.

In today's piece, Rosenheck discusses Alex Rodriguez's likely free agency asking price of $30 million per season. It's a no-brainer, writes Rosenheck: A-Rod ain't worth it.

...Rodriguez would probably drop off to an eight-win value in 2009, then have to move back to third, where he would be worth about five wins in 2010 and 2011 and four in 2012. He may be a good fit for a team like the White Sox, who field the banjo hitter Juan Uribe at shortstop, have a core of above-average players in place and play in a hotly contested division.

But is Rodriguez worth $30 million a year? Not close. Silver wrote that teams on the playoff bubble — those expecting to win 83 to 94 games — collect an additional $2.6 million in revenue for every extra game they win, on average. If the industry continues to grow at a healthy rate, those figures should increase by 8 percent a year.

Thus, if he played for a team like the White Sox, Rodriguez could be expected to generate $25 million of revenue in 2008, $24 million in 2009, $17 million in 2010 and 2011, and $16 million in 2012, for a total of a little less than $100 million over five years. He is hoping to sign for about 50 percent more, and perhaps with another year or two tacked on once he is well into his twilight years.
the real way to make money in baseball is by developing young players and reaping the rewards of their production before they hit free agency. As with many auctions, the real winners of the A-Rod sweepstakes will be the teams that stay on the sideline.

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